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Navigating Social Security Overhaul: Essential Insights for Credit Union Leaders in 2025

Credit Union Wire

Recent Changes to Social Security: What Credit Union Leaders Need to Know

Recent developments in the Social Security program have sparked considerable interest and concern among beneficiaries and financial professionals alike. As changes roll out for 2025, credit union executives are fielding more questions about the future of Social Security, its funding status, and strategies to help members optimize their retirement benefits. A recent workshop in Bakersfield, California, hosted by Safe 1 Credit Union and Moneywise Wealth Management, aimed to provide clarity for both current and future retirees about navigating these updates.

Key Changes to Social Security in 2025

The Social Security Administration (SSA) has implemented several notable adjustments for 2025. Perhaps most significantly, beneficiaries will see a 2.5% cost-of-living adjustment (COLA), the smallest annual increase since 2020. This COLA raises the average retiree’s monthly benefit from $1,927 to $1,976, with married couples receiving an average monthly benefit of $3,089, up $75 from the previous year. While this adjustment helps address inflation, it does not mitigate the persistent high costs of essentials like groceries and housing.

Alongside the COLA, the maximum amount of earnings subject to Social Security tax has risen to $176,100, up from $168,600 in 2024. This change reflects increased average wages and will affect higher-earning members of your credit union community.

The tax rate itself remains unchanged, with employees contributing 7.65% (covering both Social Security and Medicare), and self-employed individuals paying 15.30%. Individuals earning more than $200,000 annually (or $250,000 for married couples filing jointly) continue to pay an additional 0.9% Medicare tax.

Elimination of the Windfall Elimination Provision and Government Pension Offset

Another significant legislative update is the passage of the Social Security Fairness Act, signed into law on January 5, 2025. This act ends both the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), previously responsible for reducing or eliminating benefits for more than 2.8 million people receiving a pension from work not covered by Social Security. While this change offers increased benefits for some teachers, firefighters, police officers, and selected federal employees, it does not impact the majority of state and local public workers whose jobs are already covered by Social Security taxes. Credit union leaders should note this distinction when advising members on expected benefit adjustments.

Maximizing Social Security Benefits: Timing and Strategies

During the Bakersfield workshop, Dustin Weaver, a senior financial advisor with Moneywise Wealth Management, emphasized the importance of timing in claiming Social Security benefits. While eligible workers can begin drawing benefits at age 62, those born in 1960 or later will not reach full retirement age until 67. Delaying the start of benefits can lead to a lifetime increase in payments. Weaver noted, “The difference in drawing benefits at age 62 versus 67 is about 30%.” In other words, early claimants receive substantially reduced monthly payments compared to those who wait until full retirement age.

Credit union advisors should encourage members to carefully evaluate their personal health, retirement savings, and potential longevity before making this important decision. Member education is critical, as misconceptions about ‘losing out’ on benefits by waiting can lead to suboptimal choices.

Social Security’s Funding Outlook Beyond 2035

A frequent question from both members and financial professionals centers on the long-term sustainability of Social Security. Attendees at the workshop expressed concern about projections showing the trust fund may be depleted as soon as 2035. Weaver reassured the audience: “There’s over $2 trillion, around two and a half trillion dollars, in the trust fund for Social Security. In 2035, that is looking a little grave; they’ve spent a lot of that money, but they plan to make some improvements between now and then so that it remains a big piece of income for a lot of households going forward.”

It is important for credit union executives to understand that, even if the trust fund is exhausted, Social Security will not disappear. Payroll taxes from current workers will still fund about 75% of scheduled benefits. Legislative adjustments—such as increasing the payroll tax cap, tweaking the benefits formula, or making other tax changes—are expected to be debated and potentially implemented before the trust fund runs out of reserves.

The Earnings Test: Working While Receiving Benefits

The SSA permits workers to collect Social Security benefits before their full retirement age but enforces an “earnings test” to prevent double-dipping. For 2025, Social Security temporarily withholds $1 of benefits for every $2 earned over $23,400 for those who have not yet reached full retirement age. The threshold jumps to $62,160 in the year a worker reaches full retirement age, with $1 withheld for every $3 above that limit. Importantly, once full retirement age is reached, no benefits are withheld regardless of income.

Addressing the Participation Gap

Weaver also highlighted the growing gap between those paying into Social Security and those receiving it, identifying a roughly 25% shortfall. While this is a real challenge for program sustainability, current policy discussions suggest the system will remain a major source of retirement income for decades to come.

Action Steps for Credit Union Executives

Given these ongoing changes and uncertainties, credit unions are positioned as trusted advisors for members navigating Social Security. Consider these actions:

  • Host educational workshops—either independently or with financial partners—to inform members about Social Security updates and best practices for optimizing benefits.
  • Develop resources explaining the impact of recent COLA adjustments, tax cap increases, and elimination of WEP/GPO provisions.
  • Train staff to answer frequently asked questions about benefit timing, the earnings test, and program solvency concerns.
  • Encourage members to create a secure Social Security account to track earnings history and project future benefits.

Conclusion

With Social Security undergoing substantial changes in 2025—from updated COLA and tax caps to the elimination of WEP and GPO—credit union executives need to stay informed and proactive. By providing timely guidance and educational opportunities, credit unions can help members make informed decisions that will maximize their long-term financial security in retirement.